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Fiscal policy to maintain steady growth

By Wei Tian (China Daily)

08:11, February 02, 2012

BEIJING - A proactive fiscal policy is a "feasible and indispensable" option to allow China to maintain steady development amid the global economic downturn, said Finance Minister Xie Xuren on Wednesday.
Analysts said an aggressive fiscal policy would be on a "controllable level", and the focus of further fiscal operations will fall on structural tax cuts.

"Domestic and global turmoil have not changed the fundamentals of China's economy, and fiscal policies will have to continue playing a vital role in maintaining steady development," Xie wrote in an article for the latest issue of Qiushi Magazine.

Xie said that further expenditure is needed in areas such as key projects under construction and those in the planning stage. Other areas include improving people's livelihoods and bolstering the upgrading of smaller businesses.

At an executive meeting of the State Council, China's cabinet, on Tuesday, Premier Wen Jiabao said that the government will work to ensure capital flow in key projects to keep investment growing at a steady level.

The government will also step up credit support for the real economy, especially for small and medium-sized enterprises (SMEs), said Wen, who also promised wider market access to invigorate private business.

"China has paid great attention to risk control when implementing proactive fiscal policies, and its fiscal deficit and debt level is still within the safe zone," Xie said.

"Therefore, to continue to carry out such policies is both necessary and possible," he said.

China's fiscal revenue surged by nearly a quarter to a record 10.37 trillion yuan ($1.64 trillion) in 2011, while annual fiscal spending stood at 10.89 trillion yuan, leaving the country with a deficit level at 1.1 percent of GDP.

"In 2012, the deficit level will remain equivalent to, if not slightly above, that of the previous year," said Gao Peiyong, head of the Finance and Trade Economics Institute under the Chinese Academy of Social Sciences.

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